Best Form of Corporate Ownership

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Glut-Max Gym

You plan to open GlutMax!, a full-service gym with solarium, health and beauty expertise, and personal trainers. You currently have $50,000 available. You estimate you will need $100,000 to start and operate the gym for 1 year. You also estimate you will need $25,000 a year for re-investment, assuming no growth. You plan on being the sole owner if possible, and having two managers: one for the technical side and one for the business side. You are well-known in the community and could obtain a loan since you have successfully been in business before. You could also find people to invest in your gym, but you don't like the idea of losing control. You have already started finding suppliers and buying equipment for your new venture. Your friend, Flicka, has agreed to do much of the footwork, in terms of applications and filings with the state, for a fee. So far, all has gone well except that last week Flicka forgot to set the brake on her van while dropping off a check to the printing firm that's doing the marketing materials for your new venture. Flicka's van rolled down a hill and crashed through six feet of redwood fence fronting a local real estate company run by an old friend of yours, Josh. Josh's told you that, because of Flicka, you have really put him in a bind, as now he has to pay to fix the fence and business has been terrible for the last few months. Now, with a shabby-looking front fence, he fears he'll get fewer walk-in customers. He's asking you to pay for the fence damage.

Use the above fact scenario to answer the following questions:

1) What form of business should you choose for GlutMax! And why? Justify your choice in relation to the other reasonable alternatives available to you.

The author of this report would point to the beginning of the law and business associations chapter for this one. A sole proprietorship would give the owner full control but there is unlimited personal liability on the part of said owner.

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This makes sole proprietorship a bad choice. A general partnership is also a basic no-go for much the same reason. The liability is unlimited and the owner in question would actually have to share ownership between the partners. A limited partnership would not really make any sense because the owner that wants to retain control would be an active part of the management of the firm and would not be a limited partner. Thus, there is no real difference between a regular partnership and a limited partnership as far as the owner is concerned. A public corporation would be a non-starter because there would be a separation between the ownership and the control of the firm and that goes against what the owner is wanting. A subchapter S corporation would be the wrong choice for the same reason. The only major upside for the subchapter S corporation and the public corporation would be less liability. This leaves the last and best choice and that would be a limited liability corporation. There can be other members but there would be retaining of control and limiting of liability (Kubasek, Brennan & Browne, 2015, p 217-218)

2) Are you and/or Flicka responsible, legally or ethically, for Josh's fence repairs? Explain why or why not.

Per the Pearson custom text, there are three total considerations that have to be brought into this conversation

1) The van belongs to Flicka. Generally, this would mean that if Flicka was negligent, the burden of any accidents or mishaps would fall on Flicka and the….....

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